Posted on 08 March 2022
How to declare the sale of a second home or a rental property?
You want to sell your rental property, but you are wondering how the capital gain you will make will be taxed. Is it a capital gain or a business profit? What conditions must be respected? You can't get away with it?
You are in the right place! We explain you in which case your capital gain on the sale of a real estate is taxed and how much will be really taxed.
When selling a property (built or not), there are two cases to distinguish:
1. Speculation profit
Speculative profit is defined as an investment made only for the purpose of reselling in the short term and making a profit on the sale. By "short term", the tax authorities will consider that if the purchase and sale of a property is made within a period of less than 2 years, then it is a speculative investment.
The speculation profit will then be calculated as follows:
Sale price - Purchase price = Speculation profit
Speculation profit will be taxed at the progressive scale, i.e. at the "normal" rate.
2. Profit on disposal
The profit from the sale of a property is considered a capital gain when the time between the purchase and the sale is more than 2 years.
In this case, the capital gain is determined as follows:
Sale price - Revalued acquisition price = Profit on disposal
This profit will be taxed at the half global rate (half average rate), i.e. at a maximum of 21%.
Certain allowances can also be deducted from the profit on disposal, without creating a negative income.
Every 10 years, each taxpayer benefits from 50,000 euros, increased to 100,000 euros for spouses and partners who are collectively taxable. Please note that the amount is reduced if you have already benefited from this deduction during the last ten years.
In the case of an inheritance, an allowance of 75,000 euros is granted when the property acquired by inheritance in direct line was the parent's main residency.
Example:
Yannick and his wife are selling their second home. They bought it in 2016 for €500 000.
They are now selling it for €800 000. The property has been revalued at the price of €600 000.
Yannick and his wife are taxed at the global rate of 30%. They have not benefited from any tax allowance over the last 10 years.
Holding period
2021 - 2016 = 5 years, so the 2 years period is respected
Capital gain
800 000 - 600 000 = €200 000
Allowance
200 000 - (50 000*2) = €100 000
Tax on the sale
100 000 * 15% = €15 000
How to declare the profit of disposal or speculation profit?
This is done by completing Form 700 and then reporting the net income on Form 100 in the Miscellaneous Net Income category.
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